Property Purchase with Grants

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I posted this in the discussion section and I think I may have posted in the wrong section, so i'll try here in the Tech Queries. I have a question regarding the the recording of a property purchase and I am hoping someone will be able to lead me to an answer. This transaction is rather lengthy, so please bear with me.

On September 17th our non-profit company received a grant for $30,000.00 to purchase a building. We borrowed $100,000.00 to purchase the building. The entries used to record the two items are:

dr cash $130,000.00
cr Notes Payable $100,000.00
cr Revenue $30,000.00 (should this be deferred?)

On September 21st we purchased the The cost of the building ended up being $120,000.00. The value of the land was approx. $20,000.00 so the acquisition cost of the building ended up being $100,000.00 including set up cost. The estimated useful life is 30 years. The entry on the books is:

dr Land $20,000.00
dr Buildings $100,000.00
cr Cash $120,000.00

On September 25 we received a forgivable (30 year) loan from the State in the amount of 50,000.00. If we stop using the building for its intended purpose we have to pay the loan back. The entry on the books is:

dr Cash $50,000.00
cr Revenue $50,000.00 (I don't think this should be here, should be liability - forgivable)

On September 28 we received an additional forgivable (30 year) loan from the state for $20,000.00. This money was used to rehab the property by purchasing furniture, hot water heaters etc... We expensed the items we purchased rather than adding them to the cost of the building. The entry on the books for this is:

dr Expense 20,000.00
dr Cash $20,000.00
cr Revenue $20,000.00 (should be liability - forgivable)
cr Cash 20,000.00

On September 30, we paid $60,000.00 toward the original $100,000.00 loan from Sept. 17. The note was canceled and we were told we did not have to pay the balance on the loan (40,000.00). The entry for this was:

dr Notes Payable $100,000.00
cr Revenue $40,000.00 (this entry is okay)
cr Cash $70,000.00

So my questions are should the Grant for $30,000.00 be recorded as revenue for September or should it be deferred over the life of the building?

How do we record the $70,000.00 forgivable loan from the state? It should be a liability(Mortgage Payable) with the forgivable portion recorded to revenue each year. But since we already have the cost of the building recorded I'm not sure what to debit.

I think we overstated our revenue for September but I'm not sure how to correct this. If anyone can help or tell me the correct way to record this transaction I would appreciate it. Thank you in advance for taking the time to lend me hand and to help me make sense of this.
 
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As far as I can see from what you've posted...

Grant
Okay for starters the recognition of the grant shouldn't have been in revenue... it's not a sale or realisation of economic benefit.

You hold it as a deferred asset on the BS and unwind it against the loan repayments in the classification in the P+L you are currently posting the acquisition repayments to.

On the other hand it looks like acquisition was one lump sum sum of DR Asset CR cash so you would Dr Reserve Cr Asset

Loan

You're correct, it should be classified as a liability. You should also be recognising a discounted provision which should be unwound for the 30 years to represent the payback issue (unless you can show a better than possible likelihood of it not stopping using building for intended purpose)

This should also be the treatment for the additional loan (unless specifically granted for the purpose to which it was used)

Your Questions
The accounting for these two entries should be seperate and therefore your repayment apportionment should also have been...

Saying that as the grant was... well a grant I'm assuming the 60 KUSD should have been apportioned in its entirety against the the loan and the liability balance reduced accordingly. The provision should also be reduced accordingly. If you discounted correctly the net P+L impact should be immaterial.

Hope that helps, please let me know if any of the above assumptions were incorrect.
 
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I hope I understand this correctly.

Thank you for the reply to my questions. Please note the amount in my last entry above is wrong. I have Credited the cash for $70,000.00 and it should be $60,000.00.

I think I am following what you are saying but I would like to recap just to make sure.

Based on your reply, this is my understanding of how the transactions should have been recorded.

Code:
The Grant from the County received on the 17th should be deferred as shown here.
DR Cash  130,000.00   (Balance Sheet)
CR Notes Payable  100,000.00  (Balance Sheet)
CR Grant Deferred  30,000.00  (Balance Sheet)

The grant from the County is unwound over the 30 year life of the building at the rate of 1,000.00 per year.
DR Grant Deferred $1,000.00  (Balance Sheet)
CR Grant Revenue  $1,000.00  (P+L)
The asset entry on the 21st for the land and buildings is correct.


Code:
On the 25th when we received a forgivable mortgage from the State for 50,000.00 we should record it as:
DR Cash  $50,000.00  (balance Sheet)
CR Mortgage Forgivable liability $50,000.00 (balance sheet)

The mortgage from the State is unwound over the 30 year life of the building at the rate of 1,666.67 per year
DR Mortgage Forgivable liability 1,666.67  (balance sheet)
CR Motgage Forgivable Revenue 1,666.67 (P+L)
I tend to be on the conservative side. I reality believe we will always us the building for its intended purpose, one never knows what can happen in 30 years, so I would be inclined to keep the payback on the books.

Code:
On the 28 we received and additional amount from the State that was added to the forgivable mortgage of $50,000.00.  The entry for this additional amount should be :
CR Mortgage Forgivable Liabiltiy $20,000.00 (balance sheet)
DR Cash  (balance sheet)

This additional amount is unwound over the 30 year life of the building at the rate of 666.67 per year.
DR Mortgage Forgivable $666.67
CR Motgage Forgivable Revenue $666.67
The 50,000.00 from the State was to given to us to cover one half of the cost of the buildings. The Grant of $30,000.00 from the County was to cover the rest of the purchase price.

We borrowed 100,000.00 from an affiliate to initially pay for the property but we paid back $60,000.00 of this loan in September. The remaining $40,000.00 we were told we didn’t have to pay this back.

If my entries above are correct, how do I adjust our books to show the correct amounts? We closed our books on December 31, 2011 so I am not sure how to get the liability recorded correctly. I have to credit the mortgage forgivable liability, credit the deferred revenue, but I do not know what to debit?

I hope I understand your answer correctly. Thanks again for taking the time to help me get pointed in the right direction.
 

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